The FBI's Plan For The Millions Worth Of Bitcoins Seized From Silk Road

When the FBI arrested alleged Silk Road boss Ross William Ulbricht and took his site down, they seized the site's assets which were primarily the currency of choice on the anonymous online drug bazaar: Bitcoins. A whole lot of Bitcoins.

In the criminal complaint against Ulbricht, the FBI said that the Silk Road had total sales of over 9.5 million Bitcoins, collecting a revenue of 600,000 of the digital coin. (Given the current price -- $140/Bitcoin -- that's $1.2 billion in sales and $80 million in commissions.)

The FBI initially seized over 26,000 Bitcoins. I asked the FBI spokesperson what the plan is for those cryptocoins. "We will download the Bitcoin and store them," she said. "We will hold them until the judicial process is over."

Then what?

"This is kind of new to us," she said. "We will probably just liquidate them."

In other words, the government is hoping the price of Bitcoin stays high for the Bit-fire sale to come once Ulbricht's trial is over. Good news for them: the price dropped about 11% when the Silk Road sack first happened but has since recovered. After all, as the criminal complaint notes, "Bitcoins are not illegal in and of themselves and have known legitimate uses."

The spokesperson says the approximately 26,000 Bitcoins seized are just the ones that were held in Silk Road accounts. In other words, it's Silk Road users' Bitcoin. The FBI has not been able to get to Ulbricht's personal Bitcoin yet. "That's like another $80 million worth," she said, explaining that it was held separately and is encrypted. If that is indeed what he's holding, that's close to 600,000 Bitcoin all together or about 5% of all Bitcoin currently in existence. (Update 10-25: The FBI says it's seized 144,000 Bitcoins, or about $28 million, that it believes belong to Ross Ulbricht.)

This is the FBI's Bitcoin wallet.

Thanks to the transparency of the Bitcoin block chain, you can actually see that the FBI Bit-seizure has already happened. Reddit has located what looks to be the FBI's Bitcoin wallet; there's an influx of 27,000 Bitcoins into it starting on Wednesday, October 2. Someone has helpfully edited the blockchain information for the wallet so that its name is "Silkroad Seized Coins." Now members of Reddit are starting to use the wallet as an email address, sending it tiny amounts of Bitcoins along with public messages, which can be read here.

"hey computer geek, who control this address," writes one FBI "tipper." "'Ross Ulbricht' is not the bad guy, you are a bad guy. Please open your eyes, dont be brainwashed, and think your self!!!"

I asked the spokesperson if users of Silk Road could try to recover the Bitcoins in their now-seized accounts.

She laughed.

"There is not likely to be restitution in this case," she said. "If they're knowingly buying something illegal, they can't get their money back."